Despite being one the best run clubs in the country for the majority of the last century, under the watch of Ivan Gazidis, Arsenal seriously dropped the ball at exactly the wrong time.
Having written at length about the state of the Arsenal first team squad and the commensurate need for investment, I’ve seen and heard a lot of comment about how the Liverpool game and the rush for fourth may encourage Stan Kroenke to spend some of the Wall-Mart billions.
Unfortunately, I’m here to give everyone a reality check. And not just the obvious one about Silent Stan’s reluctance to spend. The fact is, even if KSE wanted to go full Abramovich or Sheikh Mansour, it simply isn’t possible, due to regulations that govern football clubs in the Premier League.
Apologies to readers who know this, but most Arsenal fans, and indeed football fans as a whole, don’t.
You see, while Uefa’s FFP has shown itself as toothless and corruptible as you’d expect given the nature of that governing body, the Premier League’s version, Short Term Cost Controls (STCC), has shown itself to have a little more teeth, although typically in ways that benefit some parties more than others.
Perhaps intended to work in tandem with UEFA’s model that deals with overall spending vs income, the EPL version is rather more specific. The Premier League recognised that it was wage inflation rather than transfer fee inflation that was posing the greater risk to the stability of football clubs – just ask Leeds United, Q.P.R and Sunderland fans. The recently implemented regulations (which into effect in 2016/17) seek to stop these spiralling out of control, particularly against the backdrop of TV money accelerating the increase in player wages. These regulations were also influenced by the consistent proof that at all but the obscene levels of transfer expenditure, it is the amounts of money spent on wages rather than on initial signings that has the greater correlation with league position.
Accordingly, rules were introduced to put a cap on increases in wage expenditure, in a manner that attempted to be fair across the board.
This was laid out in a number of ways:
- STCC rules only apply to clubs with an annual wage bill of more than £67m (including salaries, bonuses and image rights).
- Using the previous year’s wage bill as a baseline (unless the club wishes to use 2012/13 season – which almost none do given how much wages have increased), these clubs cannot raise wages by more than £7m per annum (or a set figure if using the 2012/13 baseline that stood at £19m in 2016).
- These rules are directly related to centralised TV revenue distribution. So, if a club demonstrates its wage increases are financed by its ‘own revenue’, they can add to this £7m a year limit.
- ‘Own revenue’ includes player sales, commercial/sponsorship deals, match day income and UEFA & domestic prize distributions.
At a first glance, this all seems eminently sensible. If you are well managed, you should do better on the pitch, and as a result, generate more commercial revenue, match day income and prize money. Being well managed off the pitch should increase player sales revenue and other commercial income. As such, it is a very sensible model.
The problem is, these rules were introduced after the horse bolted in terms of encouraging a level playing field and preventing the abuse of the league’s competitive structure by vast owner financial input, thus inflating wage figures. By finally realising that the ‘greed is good’ mantra has its dangers even with the billions pumping into top-flight English football, the Premier League has cemented the new hierarchy formed by the uber-spenders of recent years.
Beyond prize money, match day income and player sales, there is one other way to boost your possible wage pot via the ‘own revenue’ route. That is commercial and sponsorship deals.
Sadly, this is another area where Ivan Gazidis tenure as CEO was a failure. While commercial revenues are fundamentally linked to on the pitch performance, other clubs have done a better job of growing their commercial profits without necessarily achieving more success. In 2016/17 commercial profits only increased by £10.7m, despite a record 13th FA Cup final victory. That limited Arsenal’s annual wage increase to about £17m, which gets you Mkhitaryan and Welbeck for a year.
Commercial profits (not to mention match day income, prize money and TV money) have also taken a major hit due to not qualifying for the Champions League.
What to do, what to do, what to do? The outlook was decidedly blue…
It’s pretty clear that as a club Arsenal have limited scope for player investment to renew the squad, not just in terms of cash to flash, but to a greater degree by the wage cap enforced by Premier League STCC regulations.
Short of relying solely on Unai Emery getting this team into the Champions League without qualifying rounds as regularly as Wenger a decade ago, Arsenal’s immediate priority has to get their house in order in terms of managing the costs of the wage bill.
For those looking for an explanation of why the club withdrew its contract offer to Aaron Ramsey, it is the first sign of the new regime trying to prioritise where its money is spent. There are plenty of rumours that Ramsey’s agent was trying to play Ozil-esque hardball with the club (not to mention touting his client’s services around while an offer was thought by the club to be agreed), and Rahul and Vinai, unlike Ivan, refused to blink.
As well as not committing vast wages to another player who isn’t likely to be a nailed on first choice in Emery’s preferred set-up, it also sends out a broader message that the days of the creeping Arsenal gravy train for wages, have come to an end.
It seems this will apply in all cases where players prevaricate over contracts to maximise their earnings. Raul Sanllehi is now making the big football decisions and the Spaniard has already made it clear that the club can’t continue to make the same mistakes.
“I do believe that a player’s contract should never go to the last year, as a policy,” said Sanllehi.
“Normally, the contracts of the players are for five years. You need to have a clear idea of what you want to do with that player when he is in the third year, at the latest.”
We don’t yet know if he will, unlike his predecessor, walk the walk as well as he talks the talk, but he’s certainly making the right noises on this issue. The contracts expiring this summer, although they represent asset wastage as already mentioned, give the club a little wiggle room. Ramsey’s departure has already been confirmed, and it’s hard to see Danny Welbeck being offered a new contract that he would accept given his third serious injury in five seasons. Likewise with Carl Jenkinson and David Ospina, given the club’s attempts to rid themselves of both in recent transfer windows. It’s also hard to see Petr Cech come back to continue warming the bench for a significant pay cut. That already frees over £400k p/w for players who, apart from Ramsey, will have not contributed greatly this season.
There is a little respite on the horizon offered by the upcoming change in kit manufacturer, with Adidas taking over from Puma adding £20m to our annual commercial revenue. We should also see significant increases in our sleeve sponsorship revenue.
There is also the issue of player sales.
Arsenal have far fewer expendable saleable assets on their books than in recent seasons, but equally have got on with contract renewals for all those they see having a long-term future at the club. So any players departing should command a reasonable fee, particularly as we have trimmed off any fat from the squad (bar the parting Ospina and Jenkinson, and possibly Elneny) in recent seasons.
The question mark is also the fluorescent elephant in the room, Mesut Ozil. Does or can he fit into the manager’s plans going forward? His talent isn’t in doubt, but his suitability is. His departure would not only free up a serious chunk of the wage bill, but would also presumably generate some sort of transfer fee. The player, through his agent, has made it clear he won’t be ushered out easily, so it’s incumbent on the manager to find a way to utilise him well enough to either get him performing sufficiently to be a long-term first-teamer, or to protect his value for a sale to an attractive destination in the summer.
Longer term, the club needs to re-position its ego from trying to live like the Bayern Munich model boasted of by Ivan Gazidis, and continue the transition to being rather more like Borussia Dortmund started by hiring diamond eyed Sven. We have to be more imaginative with our signings than in recent years, and return to the model of ‘making’ players rather than buying them. Guendouzi and Torriera are certainly a good start, and the progress of academy graduates like Nelson, Willock, Nketiah, Smith Rowe and Saka will and must be prioritised, as much for our home-grown quota as anything else.
It also makes the approach of pursuing loan signings (either as stop gaps or ‘try before you buy’ options) eminently sensible. It also means older squad players like Sokratis or even Lichsteiner are likely to be the order of the day for the short to medium term.
We have to be honest enough with ourselves to admit that when it comes to the absolute top table of European football, we ARE a selling club, for the right price. As I said before, we are not going to be able to compete financially with PSG, the Manchester clubs, Chelsea, Real Madrid, Barcelona, Bayern or Juventus in the transfer market in the next few years. Even though ‘project youth’ was part financial stop-gap/part Wenger vanity project, it has to be a model for part of our future operation. If that identification and focus on young talent can be augmented by smart signings of impactful senior players, we can find a sustainable model that should allow us to only be a selling club when it comes to those players we feel comfortable with selling. After all, selling Coutinho seems not to have done Liverpool any harm.
The key thing is, turning things around will require a cultural and strategic shift at the club from the modus operandi of recent seasons, and cannot be done overnight – even if we suddenly gained a Brewster’s Billions oil magnate. Liverpool, Atletico, the title-winning Monaco side and particularly Dortmund and Spurs show that it can be done, but will require patience with both the head coach and the club’s senior management.
We all wanted change, and the change has come, but its effects cannot be immediate.
We can only hope that the last 4-5 years worth of chronic managerial and strategic mistakes don’t take as long to overcome.